Paradoxes of Decarbonization

Abstract

Scholars and policymakers continue to debate the shape of a post-carbon world, and how fast the United States can “decarbonize” its energy sector. Recent trends -- including the reduced costs of renewables, regulatory and market pressure on coal-fired power, and successful integration of large amounts of wind power into the grid -- have have fed optimism about the possibility of rapid and “deep” decarbonization of the electricity sector. Unfortunately, however, encouraging ever-more substitution of renewables for fossil fuels creates unintended consequences -- paradoxes -- that stem in part from two sometimes unavoidable and under-appreciated truths. First, the three attributes we value in the electricity system -- cost, reliability and environmental performance -- are in tension with one another. Advancing any one value comes at the expense of the others, and there are limits to the size of the cost increases or reliability decreases the public will accept in order to improve environmental performance. Second, most of the decisions about which types of electric generators will be built, and how and when existing generators will be used to serve demand, will not be made or dictated by policymakers: rather, they will be made by private sector actors guided by economic motives. The market reacts to the injection of more renewables in ways that may not always strike the popular or intended balance between reliability, cost and environmental performance. This article explores three sets of paradoxical consequences of rapid, deep decarbonization that emanate from these two truths: (i) the reliability-cost paradox, in which higher levels of renewable generation beget steps necessary to ensure system reliability, which beget both unintended environmental consequences and (in competitive markets) and a feedback loop that exacerbates reliability and/or cost problems; (ii) the health paradox, which refers to the fact that policies that discourage all fossil-fueled generation can be environmentally counterproductive, because different fossil fuels have different health and environmental consequences; and (iii) the fairness paradox which focuses on the relative costliness and potentially regressive consequences of plans to use distributed generation as a path to decarbonization. For these reasons, the optimal route to decarbonization -- the shortest (and surest) route -- may not be a straight line.